Increases in national minimum wage and right to work enforcement – should you be worried?

Increases in national minimum wage and right to work enforcement – should you be worried?

The government has recently published statistics showing yet another increase in the number of employers fined for not paying the correct minimum wage to employees, or for employing workers who don’t have a right to work in the UK.

At the same time, and as expected, the numbers of employment tribunal cases being started by dissatisfied employees against their employers are on the increase, after the abolition of tribunal fees last year (read our coverage of that here).

We take a look at the trends behind the figures, and what you as an employer can do to reduce your risk of being included in the next ‘naming and shaming’ list of fined employers published by the government, or finding yourself at the wrong end of a costly tribunal claim.

National Minimum Wage / National Living Wage

The latest list of 239 named employers, who have been found to have underpaid 22,400 UK workers by a total of £1.44million, was published by the government on 6th July. This comes on the back of previous lists every few months, the last being in March.

In addition to being required to repay employees the necessary backpay, the government also fined the employers, with additional penalties this time totalling a record £1.97million.

The top five reasons given for National Minimum and Living Wage underpayments in this round were:

taking deductions from wages for costs, such as uniforms

underpaying apprentices

failing to pay travel time

misusing the accommodation offset

using the wrong time periods for calculating pay

Whilst David Metcalf, the UK’s Director of Labour Market Enforcement Strategy, acknowledges that more needs to be done to provide guidance, particularly technical guidance, about how to avoid paying low paid workers below the minimum wage, it is clear from his latest enforcement strategy that they are also boosting enforcement activities.

HMRC has now put into operation its annual minimum wage awareness campaign, in which they urge workers who suspect that they have been underpaid to file a complaint. It is now much easier for employees to file a complaint since the introduction of the HMRC’s online procedure at the beginning of last year.

And overall, funding for minimum wage enforcement has more than doubled since 2015. This is not an issue that is going to go away, even for an honest mistake. An example here is the current complex situation regarding the payment of employees who work overnight, where there is an expectation that some of the time at work might be spent sleeping, such as in the care sector. There have been recent conflicting decisions in the courts about whether or not the time spent sleeping should be paid at minimum wage levels. It is very difficult for employers to keep up to date with all the changes in this area.

This is where HR support can help – whether with HR software that warns you if you are in danger of dropping below the relevant minimum wage, or with HR advisers that can help you navigate the potential minefield of working out the correct contract and the right pay structure for your employees. It is very important, for instance, to look at all financial elements involved in an employee’s remuneration and the actual time spent working, or travelling with work.

Checking that people have the right to work

The government department, UK Visas and Immigration, published at the end of May their latest quarterly report of the number of fines issued to employers for having illegal workers. In the quarter between 1 October 2017 and 30 December 2017, 990 illegal workers were found in the UK, a substantial increase on the figure of 826 the previous quarter. This resulted in 624 employers facing penalties, with fines totalling £11.6million.

It is very important, for every new employee, that you go through the correct process of checking that they have the right to work in the UK.

If you know, or have reasonable cause to believe that the person does not have that right, and you still employ them, you could be facing a fine or, in the worst of cases, a prison sentence. If you suspect that their papers may be false, you should not employ them.

The rules are strict and you need to make sure that you are aware, not just of whether they have the right to work on Day One, but also when their leave to remain in the UK is due to expire, and whether the details of their permission means that they aren’t allowed to do certain types of work.

An HR software system can prompt you when work permits or visas are expiring, and an HR support service can help you with advice as to what and how to check during the initial process.

Tribunal Claims on the increase

And finally the decision last year by the Supreme Court that employment tribunal fees were unlawful has resulted in an increase in the number of claims being brought, as well as claims for refunds of fees paid since they were introduced in 2013.

The most recent figures published by the Ministry of Justice in June this year, relate to the first quarter of 2018. In that period, the number of single employment claims started has risen 118% compared with the same quarter in 2017.

From 2013 up to July 2017, the date of the Supreme Court decision, the number of single claims issued had remained relatively stable at approximately 4,300 per quarter. Single claims in the first quarter of 2018 were more than double that figure, at 9,252.

The most common type of claim being made currently is for unauthorised deductions from pay, likely, in many cases, to be claims brought by gig economy or other freelance or temporary staff claiming worker status and therefore entitlement to additional benefits such as holiday pay and National Minimum Wage / National Living Wage (more information from us on that here).

If you are at all in the grey area of not being sure whether someone working for you is a freelancer or should be treated as an employee, then it is worth getting advice on this from a qualified HR consultant. It is also valuable, in this area, to have open and honest conversations with those working with you, to ensure that you are catering for their needs and building in the right level of desired flexibility on both sides.

If you’re unsure about where you as an employer stand on any of these issues, we’d be happy to help. Give us a call on 0333 444 0165 or send us an email on hello@citrushr.com.